Federal and State Governments Share Welfare Costs

The OAA program established the precedent of splitting welfare expenditures between the federal and state governments, while allowing the states to retain a significant amount of authority and autonomy to set standards, eligibility, and payment levels as they desired. The states, in turn, continued to share welfare expenditures with local governments, which meant that at least two, and sometimes three or more, levels of government were involved in the provision of public assistance, a situation which continues to this day.

This division, and the conflicting goals of providing a service that the public considers valuable while guarding the purse of the taxpayers, created inter-governmental tensions and rewarded efforts to shift beneficiaries into programs where some other level of government would assume a greater share of the cost. At the same time, beneficiaries had their own incentives to use or avoid certain types of services, depending on what kind of help they would receive and how burdensome the requirements for receiving it were likely to be. The OAA program was about to demonstrate that "gamesmanship" could affect program costs and utilization.